Recently, Allstate has accused other insurers of investing in credit default swaps. Does Allstate have knowledge of insurers engaging in this illegal activity? Or are these allegations a facade for the new federal oversight that would place Allstate under control of the federal government. My view on this topic is pointed:
Allstate and other major insurers are seeking federal charter to avoid state consumer protection laws and to gain an economic advantage over other property and casualty insurers. The federal legislation offers no specified safeguards for consumers, and provides for the same inept federal regulation that allowed the collapse of our financial system.
The New York insurance Superintendent has initiated this inquiry and noted that:
"Allstate Chief Executive Officer Tom Wilson in his New York Times piece arguing for federal regulation of insurance had mentioned that his company “played only a small role in unregulated insurance markets….” and, “The insurance companies that wrote credit default swaps were happy not to be regulated."
However, the Superintendent charged:
“In New York and in other states, it is illegal for an insurance company to write a credit default swap unless approved by the state insurance regulator under limited conditions,”
As quoted in the National Underwriter, The New York Insurance Superintendent, Eric Dinallo, apparently has the view that the alleged need of a federal insurance charter is propaganda and fabrication by lobbyists and some in the insurance industry:
"The Allstate opinion article, he said, had called for federal regulation of insurance based on “a number of inaccurate and misleading statements: that credit default swaps are insurance; that AIG sold credit default swaps as an insurer; and that insurance companies were unregulated in selling credit default swaps.“ In fact, most credit default swaps are not insurance because most buyers were not insuring something they owned, which is a requirement for insurance.” The regulator said that AIG had “purposely sold huge numbers of credit default swaps through a federally regulated non-insurance subsidiary because it would not have been allowed to sell swaps with no limits, no controls and no reserves through a state-regulated insurance company. Insurance company sales of credit default swaps are highly regulated and limited.” Mr. Dinallo also attacked the Allstate opinion article for “a number of broad statements that could risk unnecessarily undermining consumer confidence in the insurance industry as a whole. It states that insurance companies wrote credit default swaps and were not regulated and their solvency was not protected.” He explained that the piece did not name the insurers involved, “leaving consumers to wonder which companies. It says AIG sold credit default swaps as an insurer, suggesting any insurer could do the same, which is not true. It says Allstate itself was involved in unregulated insurance, without defining what that means.”
As I have recently indicated, the proposed federal charter for the property and casualty industry is not consumer friendly. Allstate is heavily involved and attempting to influence government leaders to create a most anti-consumer law.
Why should anyone believe anything Allstate has to say after it lied to the government in Florida last year? New York’s recent inquiry is well taken–the company has proven unworthy of the public trust.